To guarantee soft landing before accepting ejection from the SoE, Noczim’s senior managers want nothing short of golden parachutes.
The problem is Noczim’s ‘aeroplane’ is practically grounded. Asking for parachutes to jump off a stationary plane is the pinnacle of absurdity.
Before acceding to demands for a golden good-bye wave, Noczim’s board must cut the wish list by the soon-to-leave guvnors. More importantly, the board needs to sort out executive pay practices for the SoE, evidently shambolic at present. Boards are stewards appointed to safeguard shareholders’ interests and in the case of parastatals, government is the majority shareholder. But government is just a proxy answerable to citizenry. Unfortunately governance leadership, which the state should provide, is in tatters. That governance vacuum needs to be filled by the state as matter of priority to restore sanity.
The recent exit package proposals by senior managers of Noczim provide a good case study for government to weigh the consequences of its failure to take charge of the parastatal governance agenda.
Conspicuous is the demand by Noczim’s managers for a bonus. Asking for a bonus to be included in their exit package constitutes a serious leap in logic. If not a reflection of ignorance then arrogance is the driver. A bonus is part of variable pay, based on performance. Poor parastatal performance is the reason managers are being off-loaded.
The case for a bonus payment is as illogical as it ridiculous. If the board of the SoE is worth its salt, it should not find it hard to throw out this demand. Moreover, a bonus, as a remuneration component is specifically designed to motivate and retain employees. Clearly, in the case in question, Noczim is neither trying to motivate nor hold on to the managers, making a bonus payment inappropriate. In professional reward management a 13th cheque does not equate to a bonus. It is merely a benefit. A 13th cheque should not be part of a severance package calculation. A bonus can be paid to recognise a job well done, in retrospect. Which “job well done” are Noczim managers to be rewarded for? In any case a bonus is not demanded. It is not an entitlement.
If the demand for a bonus is absurd then the total exit package demanded is as comical as it is unreasonable. Common practice in calculating exit packages entails basing the figure on multiples of either basic pay or total fixed pay or a mix of the two. Excluding allowances, the separate demands from Noczim’s managers, assuming five years of service for each manager, yields 30 months or two and half years of basic pay!
To give context, we compare these demands with the practices of benchmark parastatals and blue chip private sector firms from the Sadc region. The exit package policy for senior parastatal executives from a country renowned for excellence in governing SoEs, sees head honchos receive between 7, 5 months to 9 months of basic salary. Noczim senior managers are reported to be earning an average basic salary of US$2 200 per month. Compared to the exit package of the most senior parastatal managers in our comparator country, Zimbabwe peers will be getting at least 120% more. Contrasted with the heads of our benchmark parastatals, the soon-to-go captains will rake in 60% more.
A blue chipper, arguably incomparably richer than Noczim revealed in a recent shareholder report that the maximum exit package for its senior executives is six months of the annual remuneration package of the retrenchee. Assuming the total annual remuneration for our SoE managers is twice their basic pay, a figure well above the Sadc average of about 70%, our dear managers facing the axe will be getting 15 months’ worth of total remuneration. This is beside the allowance-based demands they are making in addition to the basic salary-indexed demands. For instance, a year’s supply of fuel as part of their demanded exit package constitutes 32% of basic salary. In addition Noczim managers facing the chop want company vehicles at no charge.
In demanding a one-off holiday sponsorship as a part of their exit package, Noczim’s managers again demonstrate barefaced ignorance. Holiday benefit is a perquisite (perk). Whereas benefits are given to every employee, perks are benefits given a chosen few, the firm’s premium talent as part of a skills retention stratagem. Let me be charitable. Bowing to the holiday perk demand is tantamount to funding managers to celebrate running Noczim aground.
Evidently, we cannot expect a cash-strapped and limping parastatal to be so generous to the extent of out-doing a very rich listed blue chip firm. Scandalous it will be if the board of the SoE bows to such extortionate demands.
This whole debacle points to the poor state of remuneration governance. For starters, managers should not be compiling and invoicing the employer a list of demands. What potential retrenchees are entitled should be known in advance. Government needs to set an enabling governance framework. At the core of that framework should be a requirement for all parastatal heads and senior executives to be on renewable employment-cum-performance contracts. We suggest a contractual period of five years. In any case, the president and MPs have definite performance contracts with the electorate. Among other things, the contract should spell out clearly how the exit of executives is to be managed, including the calculation of exit packages.
Strategies for funding exit payments without breaking the bank are available. After teasing out some exit options we have come up with some innovative strategies organisations can use, whether for-profit or not-for-profit which can ensure executives get guaranteed exit packages between 15 and 18 months of basic pay. The challenge is that few captains of industry respect HR input to business strategy. HR is the proverbial stone the builders rejected.
Creative HR can make it easy for parastatals to shed executive without ugly and bruising legal cat fights, let alone tawdry public spats. Noczim’s debacle in the making is a microcosm of the parlous state of our parastatals. NewsDay, Alpha Media Holdings’ fledgling daily read, in its maiden issue reported that RBZ is in the process of chopping 60% of its workers. The RBZ plane ran aground with the drying of its fuel reserves- money-printing. No golden parachutes for RBZ chiefs.
Failure by the state to rein in erring SoEs is gross dereliction of duty. No excuses. Parastatals are the state’s baby and thus the buck stops with the state, period.
Readers’ Forum: Do you think government has enough capacity and will to rein in erring parastatals? Visit http://www.humancapitaltelescope.blogspot.com to share your thoughts.
By Brett Chulu